Florida Leads the Nation in Force-Placed Insurance

As reported by the Sun-Sentinel, Florida was the site of 35% of the country’s force-placed insurance in 2011, totaling $1.2 billion. Forced-placed insurance is the term for when a mortgage lender forces homeowners into purchasing excessive homeowners insurance or other insurance policies. This statistic was revealed through sworn testimony to the United States Judicial Panel on Multidistrict Litigation. The practice of lenders purchasing expensive insurance and then passing on the cost to homeowners has come under scrutiny because it is often more costly than when customers purchase policies directly.

Many homeowners stop paying the premiums on their policies or do not purchase any, giving banks an enhanced opportunity to force-place insurance.

According to the testimony, Florida’s share of the country’s force-placed flood insurance is more than three times the amount sold in the next-largest state, California. Since Florida has a high rate of foreclosures, many homeowners stop paying the premiums on their policies or do not purchase any, giving banks an enhanced opportunity to force-place insurance. Banks rationalize this action by saying that they only purchase this insurance for the borrower to prevent losses on property they’ve loaned money for, and say that the homeowner can replace it with a cheaper policy at any time. Although banks are permitted to do this, they are reportedly using it as an excuse to increase payments or fees charged to borrowers.

It has been alleged that in return for purchasing insurance policies with inflated premiums, banks have received various kickbacks, commissions, and other compensation from the insurance companies. This possible collusion has also involved insurance companies backdating insurance policies, setting homeowners even further back in their payments. Many banks have been the subject of lawsuits surrounding questionable lending practices, including Wells Fargo, Washington Mutual (now owned by JP Morgan), GMAC Mortgage, and US Bank.

Do you have reason to believe that your bank or mortgage lender force-placed insurance on you unfairly? If you may have fallen victim to these predatory practices, you may be entitled to legal recourse. Contact a dedicated forced-placed insurance attorney to find out if you are entitled to compensation for damages as a result of an excessive policy forced upon you.